Postal privatisation a threat to service with no benefit to customers, says report
The government’s strategy of opening up the postal market to private sector competition has provided “no significant benefits” for consumers and smaller businesses, while representing a “substantial threat” to the future of the Royal Mail, an independent report commissioned by ministers warned yesterday.
A major shakeup is needed in the way the industry is regulated if Britain is to benefit from a strong, competitive and cost-effective postal service, said the damning report by former media regulator Richard Hooper for business secretary John Hutton.
Large companies have benefited from the full liberalisation of the postal market since 2006, gaining more choice, lower prices and better quality products, but “there have been no significant benefits for smaller businesses and domestic consumers,” said the report.
Customers were largely happy with the value for money now provided by the state-owned Royal Mail but Hooper – a former deputy chairman of the media and telecoms regulator Ofcom – said the current situation endangered the future of a universal service which guarantees one price and next day delivery throughout the country.
“There is now a substantial threat to Royal Mail’s financial stability and, therefore, the universal service. We have come to the conclusion, based on evidence submitted so far, that the status quo is not tenable. It will not deliver our shared vision for the postal sector,” the report concluded.
The panel carrying out the review said in its initial findings that there was now a “strong case” for taking action to make sure the Royal Mail has a sustainable future.
“As we see rapid changes in the way people communicate, the way in which the postal sector is regulated will also need to change, and we need to establish how best to create the incentives for Royal Mail to modernise its operation, providing a stable financial future.”
The report said the postal market was changing and faced an “uncertain future”, especially as firms looked to cut costs in the face of challenging economic conditions. In the past two years, competition in the collection, sorting and transportation of bulk mail from businesses has expanded rapidly and much more quickly than was anticipated, the report found.
But there was virtually no competition to the Royal Mail in the delivery of letters despite a belief that some rival firms could invest in deliveries, perhaps twice a week, in urban centres.
The Royal Mail was delighted with a report that appeared to vindicate many of the concerns it had raised in the past.
“We welcome this report and Royal Mail absolutely agrees with the report’s conclusion that the one-price-goes-anywhere universal service to the UK’s 28m addresses is at the heart of a successful postal service.
“The report identifies the ways in which the open postal market is clearly not working and Royal Mail looks forward to submitting its further views on the changes that are required in the market,” it said.
TNT, the private sector company field-testing end-to-end mail services in Liverpool and the biggest competitor to Royal Mail elsewhere in the country, welcomed the report’s suggestion that the regulatory framework needed a shakeup.
But Nick Wells, chief executive of TNT UK, questioned the findings that consumers and small businesses were not benefiting. “We are focusing on small and medium-sized companies,” he said. He believed private sector competition had forced Royal Mail to improve its services for all consumers.
The government said that the report clearly indicated Royal Mail must now go through a revolution of its own.
Hutton said: “The initial findings from the review team paint a stark picture of the huge changes in the postal market … despite progress in recent years, I am now clear that to be successful the Royal Mail must undergo radical change.
“I have therefore asked the review team to urgently bring forward ideas, including changes to the system of regulation, to meet our ambiti
